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GRAND JUNCTION — Although the governor’s proposed initiative to end the oil and gas subsidy isn’t yet on the ballot, Mesa County Commissioners formally opposed it Monday.
As proposed, the initiative seeks to raise an additional $200 million to $321 million in taxes specifically from the oil and gas industry. It would not raise taxes on individuals, said George Merritt, who works for A Smarter Colorado, the campaign formed to promote the initiative.
Gov. Bill Ritter announced the initiative in April.
A Smarter Colorado is using volunteers and a paid company to gather some 76,000 signatures by Aug. 4 to place the issue on the Nov. 6 ballot.
Of the new money collected as a result of this initiative, 60 percent would fund college scholarships for qualified Colorado students to attend state colleges. The remaining money would be split between wildlife preservation, renewable energy products, for water and wastewater projects, for local communities experiencing oil and gas impacts, and for a fund that would stabilize all the funds over the years.
This proposal is a win-win for Colorado, Merritt said. It neither takes away from the current severance tax revenue stream nor issues new taxes on individuals, he said.
The problem, said Commissioner Craig Meis, is that the proponents did not consult with local governments or with the oil and gas industry in writing the initiative.
“I am absolutely dismayed the governor would support this initiative without reaching out to the communities,” said Commissioner Steve Acquafresca.
“My biggest concern is that we in local governments weren’t even a part of any involvement in these discussions,” when the initiative was being drafted, Meis said. “When we’re talking about impacts in our community.
“Nor was the industry which is paying it,” Meis said. “I just don’t get it.”
Meis owns Cordilleran Compliance Services engineering consulting firm, which has clients in the oil and gas industry.
Meis said the initiative has the ability to negatively impact the amount of severance tax money flowing into Mesa County in the future.
That’s not true, Merritt said. It not only maintains the current flow of severance taxes to the state and to local communities, but adds to it, he said, to the tune of $237 million to $321 million annually.
“Local communities will benefit,” Merritt said. “They will see tens of millions of dollars as a result of this.”
The ballot initiative would remove the current government subsidy given to the industry. The industry now gets a 87.5 percent credit on its property taxes.
Also, oil and gas wells that are low producers are now exempt from paying severance taxes. Under the initiative, the state would lower the exemption amount, Merritt said.
For example, in Colorado, oil wells that produce less than 15 barrels a day are considered exempt and are not now required to pay severance taxes. In 2006, 95 percent of the oil wells in the state were exempt, producing less than 15 barrels a day, according figures from the Colorado Legislative Council, which got their numbers from the Colorado Oil and Gas Conservation Commission. Those wells produced almost 60 percent of the oil that came from Colorado’s soil.
Similarly, 73 percent of Colorado’s natural gas wells are exempt, and they produce 20 percent of the state’s natural gas.
In addition to Mesa County, Club 20, the Western Slope’s coalition of governments, also opposed the initiative, saying the issue would decrease the local share of impact funds, according to a memo from Reeves Brown, Club 20 Executive Director.
Economist Jim Evans, who had directed Associated Governments of Northwest Colorado for decades, analyzed the issue and said the share local governments would get to deal with impacts would decrease from 50 percent currently to 22 percent.
“The Club 20 analysis, I’m afraid, is inaccurate,” Merritt said.
Under the proposed initiative, the 22 percent would raise more money for the local governments than the former 50 percent, because the state would be collecting more tax, Merritt said.
Using figures the Colorado Municipal League released in May, under the current severance tax structure, $93 million is considered half, or 50 percent of the severance taxes collected, that half that is diverted to local governments.
Also, according to figures by the CML, if the ballot initiative passes and the subsidy is eliminated, local governments would get 22 percent of the new severance tax total. But because the state would collect more from the oil and gas companies, that 22 percent diverted to local governments would amount to $98 million.
“It’s like someone giving you 50 percent of a grape, telling you you’re going to eat better than someone giving you 22 percent of a cantaloupe,” Merritt said.
Merritt addressed the contention the oil and gas industry would flee the state if additional taxes were imposed on it.
“After this passes, they will have a lower tax rate for the oil and gas industry than New Mexico and Wyoming. They haven’t stopped producing in Wyoming.
“They’re not going anywhere.”
Reach Marija B. Vader at mvader@gjfreepress.com.
As proposed, the initiative seeks to raise an additional $200 million to $321 million in taxes specifically from the oil and gas industry. It would not raise taxes on individuals, said George Merritt, who works for A Smarter Colorado, the campaign formed to promote the initiative.
Gov. Bill Ritter announced the initiative in April.
A Smarter Colorado is using volunteers and a paid company to gather some 76,000 signatures by Aug. 4 to place the issue on the Nov. 6 ballot.
Of the new money collected as a result of this initiative, 60 percent would fund college scholarships for qualified Colorado students to attend state colleges. The remaining money would be split between wildlife preservation, renewable energy products, for water and wastewater projects, for local communities experiencing oil and gas impacts, and for a fund that would stabilize all the funds over the years.
This proposal is a win-win for Colorado, Merritt said. It neither takes away from the current severance tax revenue stream nor issues new taxes on individuals, he said.
The problem, said Commissioner Craig Meis, is that the proponents did not consult with local governments or with the oil and gas industry in writing the initiative.
“I am absolutely dismayed the governor would support this initiative without reaching out to the communities,” said Commissioner Steve Acquafresca.
“My biggest concern is that we in local governments weren’t even a part of any involvement in these discussions,” when the initiative was being drafted, Meis said. “When we’re talking about impacts in our community.
“Nor was the industry which is paying it,” Meis said. “I just don’t get it.”
Meis owns Cordilleran Compliance Services engineering consulting firm, which has clients in the oil and gas industry.
Meis said the initiative has the ability to negatively impact the amount of severance tax money flowing into Mesa County in the future.
That’s not true, Merritt said. It not only maintains the current flow of severance taxes to the state and to local communities, but adds to it, he said, to the tune of $237 million to $321 million annually.
“Local communities will benefit,” Merritt said. “They will see tens of millions of dollars as a result of this.”
The ballot initiative would remove the current government subsidy given to the industry. The industry now gets a 87.5 percent credit on its property taxes.
Also, oil and gas wells that are low producers are now exempt from paying severance taxes. Under the initiative, the state would lower the exemption amount, Merritt said.
For example, in Colorado, oil wells that produce less than 15 barrels a day are considered exempt and are not now required to pay severance taxes. In 2006, 95 percent of the oil wells in the state were exempt, producing less than 15 barrels a day, according figures from the Colorado Legislative Council, which got their numbers from the Colorado Oil and Gas Conservation Commission. Those wells produced almost 60 percent of the oil that came from Colorado’s soil.
Similarly, 73 percent of Colorado’s natural gas wells are exempt, and they produce 20 percent of the state’s natural gas.
In addition to Mesa County, Club 20, the Western Slope’s coalition of governments, also opposed the initiative, saying the issue would decrease the local share of impact funds, according to a memo from Reeves Brown, Club 20 Executive Director.
Economist Jim Evans, who had directed Associated Governments of Northwest Colorado for decades, analyzed the issue and said the share local governments would get to deal with impacts would decrease from 50 percent currently to 22 percent.
“The Club 20 analysis, I’m afraid, is inaccurate,” Merritt said.
Under the proposed initiative, the 22 percent would raise more money for the local governments than the former 50 percent, because the state would be collecting more tax, Merritt said.
Using figures the Colorado Municipal League released in May, under the current severance tax structure, $93 million is considered half, or 50 percent of the severance taxes collected, that half that is diverted to local governments.
Also, according to figures by the CML, if the ballot initiative passes and the subsidy is eliminated, local governments would get 22 percent of the new severance tax total. But because the state would collect more from the oil and gas companies, that 22 percent diverted to local governments would amount to $98 million.
“It’s like someone giving you 50 percent of a grape, telling you you’re going to eat better than someone giving you 22 percent of a cantaloupe,” Merritt said.
Merritt addressed the contention the oil and gas industry would flee the state if additional taxes were imposed on it.
“After this passes, they will have a lower tax rate for the oil and gas industry than New Mexico and Wyoming. They haven’t stopped producing in Wyoming.
“They’re not going anywhere.”
Reach Marija B. Vader at mvader@gjfreepress.com.
